Nebraska Advantage Research and Development Act FAQs

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What is the Nebraska Advantage Research and Development Act?

The Nebraska Advantage Research and Development Act created a research tax credit, which is available for tax years beginning on or after January 1, 2006. A business firm that incurs research and experimental expenditures in Nebraska is eligible for the tax credit.

What tax credits are available?

A business firm that incurs research and experimental expenditures (as defined in § 174 of the Internal Revenue Code) may claim a tax credit equal to 15 percent of the federal tax credit allowed. The tax credit may be used to obtain a refund of sales and use taxes paid, or as a refundable income tax credit. The tax credit is allowed for the first tax year it is claimed, and may be claimed for the following 20 tax years if the business firm continues to earn the federal credit.

In addition, business firms that make expenditures in research and experimental activities on the campus of a college or university in Nebraska, or at a facility in Nebraska owned by a college or university, are allowed a tax credit equal to 35 percent of the federal credit instead of the usual 15 percent. The tax credit is allowed for the first tax year it is claimed and may be claimed for the following four tax years if the business continues to earn the federal credit and continues to have expenditures on campus.

If the business firm makes expenditures in research and experimental activities in Nebraska and in other states, the tax credit will be apportioned to determine the amount based on activities conducted in Nebraska.

Does the business firm need to submit an application prior to claiming the research tax credit?

No, there is no application or registration necessary prior to claiming the tax credit under the Nebraska Advantage Research and Development Act.

Any business making expenditures in Nebraska for research and experimental (R&D) activities, as defined in Internal Revenue Code (IRC) § 174, may claim the research tax credit on their Nebraska tax return by completing Form 3800N Worksheet RD and Form 3800N. The completed forms, including addresses of campus locations for enhanced credits, are filed with the business’s fiduciary, corporate, or partnership income tax return for the tax year in which the expenditures were made.

Does the business firm need to verify an employee's work eligibility status?

Yes. On and after October 1, 2009, all business firms claiming the tax credit must timely electronically verify the work eligibility status of all employees hired in Nebraska during the tax year for which the credit is claimed.

What if I hired an employee before October 1, 2009?

A business firm is not required to verify the work eligibility of any employee hired before October 1, 2009.

How does a business firm verify a newly hired employee's work eligibility?

A business firm should utilize E-Verify, the federal electronic verification program that ensures all new employees are legally eligible to work in the United States. E-Verify is a free and simple to use Web-based system that electronically verifies the employment eligibility of newly-hired employees. E-Verify allows participating business firms to electronically compare employee information taken from the Form I-9, Employment Eligibility Verification, against the databases of the Social Security Administration and the Department of Homeland Security. For additional information, go to the U.S. Citizenship and Immigration Service’s website at http://www.uscis.gov/portal/site/uscis and click on the E-Verify button.

What happens if a business firm does not verify the work status of a newly hired Nebraska employee?

The Nebraska Advantage Research and Development tax credit will not be granted unless the business firm can document that it has electronically verified the work eligibility status of all employees hired in Nebraska during the tax year for which the credit is claimed.

What if I have more questions?

If you have questions that were not addressed here, please contact Kate Knapp at 402-471-5773 or kate.knapp@nebraska.gov.

Many of your other questions can be answered in the following publications:

Revenue Ruling 29-13-3: Electronic Verification of Employees' Eligibility Status
and Revenue Ruling 29-10-2: Enhanced Research Tax Credits